Merkel says EU will discuss bridging finance for Ukraine next week

BRUSSELS (Reuters) - The European Union and Ukraine will discuss a bridging loan to Kiev next week so that the country can pay in advance for Russian gas deliveries for the coming months, German Chancellor Angela Merkel said on Friday.

"There is a necessity for a certain amount of bridging finance," Merkel told reporters after the first day of a European Union summit.

The latest round of talks between Moscow and Kiev, brokered by the European Commission, to try to resolve a row over Ukraine's unpaid gas bill took place on Tuesday. They ended without agreement and more talks are scheduled for Oct. 29.

Russian Energy Minister Alexander Novak said the two sides had almost reached a deal but had stumbled over the issue of how Ukraine will pay in advance for gas supplies in November and December.

Gazprom, which has cut off Kiev's gas supplies, says Ukraine's gas debt stands near $4.5 billion (3 billion pounds).

Ukraine has agreed to pay off $3.1 billion to Gazprom in two tranches this year to help unblock its access to gas over the winter.

Ukraine's Naftogaz has set aside $3.1 billion in a special escrow account to pay Russian natural gas supplier Gazprom, the chief executive of Ukraine's national oil and gas company told Reuters on Thursday.

Kiev on Tuesday asked the EU for a further 2 billion euros ($2.55 billion) in credit.

(Reporting by Andreas Rinke; Additional reporting by Alastair MacDonald and Barbara Lewis; Writing by Jan Strupczewski; Editing by Mohammad Zargham)